FX.co ★ Bund Yields Retreat as Middle East Hopes Ease Inflation Fears

Germany’s 10-year Bund yield eased to 2.97%, retreating from near 15-year highs, as hopes for a possible de-escalation in the Middle East improved risk sentiment. Reports of a US-backed 15-point peace proposal to Tehran—despite Iran’s denial that talks are underway—helped push Brent crude below $100 a barrel, easing fears of renewed energy-driven inflation. As a result, investors pared back expectations for further monetary tightening, with markets now pricing in only two additional ECB rate hikes by year-end, down from three previously. ECB President Christine Lagarde reiterated that the central bank stands ready to act “at any meeting” should energy price shocks risk feeding broader inflationary pressures. At the same time, German business confidence slumped in March to its lowest level in more than a year, highlighting the conflict’s impact on economic sentiment.